The Australian Prudential Regulation Authority (APRA) has reacted to stinging criticism in the banking royal commission by taking off its gloves and making its most aggressive move in a decade.
The regulator is suing wealth manager IOOF and some executives for not acting in the best interests of superannuation members, in what will be its first court action in 10 years.
The move may signal the end of APRA’s soft touch policy for dealing with misbehaving funds and financial entities.
In a landmark lawsuit, APRA plans to ban top executives at one of the nation’s biggest wealth managers which, if successful, could send the $2.8 trillion industry into a spin.
APRA alleges that IOOF chief executive Chris Kelaher, chairman George Venardos and three other executives are not fit to manage retirement savings.
“It is highly significant that APRA has taken this public action. The royal commission has created an environment in which it’s possible for APRA to exercise its powers,” said Gail Pearson, a University of Sydney Business School professor.
The move will send shockwaves through the super industry, she said. “I think it will give other trustees pause for thought.”
In conjunction with the court action, APRA has also told IOOF that it needs to restructure its business, saying that its existing structure has created conflicts of interest.
IOOF’s superannuation arm, with its 500,000 members, is run by a board consisting of IOOF company executives and directors. APRA accused them of working in the best interests of IOOF shareholders and not in the interests of superannuation members.
If APRA is successful, the IOOF executives will be banned from acting as superannuation trustees; however, they will still be able to be executives, directors and work in financial services.
News of the case has already decimated IOOF’s share value, with the stock nosediving 36 per cent on Friday.
The case will also hinder IOOF’s planned acquisition of ANZ’s OnePath fund, with the bank saying it will now need to reconsider the sale in the wake of APRA’s court action.
IOOF has been under investigation for compliance arrangements, breach reporting, management of conflicts of interest, staff trading policy, disclosure, whistleblower management and protection and cyber security.
IOOF said it plans to vigorously defend the APRA action.
Are you pleased that APRA is finally taking legitimate action against a misbehaving financial entity? Have you been affected by IOOF’s share price dive?